"When you look through Englewood, most people think there's no money there," says Denise
Dixon, president of ACORN Illinois. "Abandoned buildings, crime, unemployment, drugs,
that's what most people see. But the loan sharks found money. What they understood about
Englewood and neighborhoods like it was that people owned their homes and had owned
them for generations. That was money to loan sharks, so they targeted those areas. They
dangled cash in front of people's faces. If you're broke and your roof is leaking and
somebody is telling you they can give you some money to get that roof fixed, you're going
to take it. That is what happened. A lot of people refinanced the homes that they had owned
for years to get new windows or to get a new roof. We're not talking finery. Nobody decided
that they wanted a new rec room or Jacuzzi. And they were exploited by the predatory
lenders."

Jose Cruz had not told anyone that he was about to lose his house. He had worked and saved
for a long time to be able to buy the house, which included a rental property on the back of
the lot, in the Belmont-Cragin neighborhood on Chicago's Northwest Side. The first
disappointment had been that the Federal Housing Administration (FHA) had not inspected
the property as the Realtor promised, and the windows on the rental unit were rotten and had
needed immediate replacement. Cruz considered himself lucky when a man showed up
offering a loan for new windows. Then he was injured at work and was off for four months.
Only too late did he discover that the window loan carried huge fees and an interest rate so
high that he was pushed into foreclosure. He was advised to declare bankruptcy to avoid
losing the house. He was ashamed and embarrassed, and pulled away from his family in the
city so that they wouldn't know about the bankruptcy, or see the old clothes his kids and wife
were forced to wear since there was no money for anything. When an organizer knocked on
his door and asked him about the neighborhood, Cruz was ready to talk, and glad to attend
a meeting to tell public officials how mad he was about the way the whole mess had
happened. He kept going to anti-predatory lending meetings, and was stunned a few months
later when he walked into one meeting and saw his sister. He asked what she was doing there.
It turned out that she was in almost exactly the same jam, and had been too embarrassed to
tell him.

"Everybody knows that predatory lending hurts the victim," says Paul Marshilonus, a member
of the Predatory Lending Committee at the Southwest Organizing Project (SWOP). "We've
talked to people who are losing their houses, and seen the boarded up remains on our blocks.
But we were really clear from the beginning that predatory lending affects the whole
community. I'm co-chair of the Parish Council at St. Nicholas of Tolentine, and we know that
our parish can't be strong without the community and our neighbors being strong. Abandoned
houses breed crime and devalue the blocks. Young children are afraid to walk by the houses.
We are all in this together. It's a neighborhood problem, a city problem, a state problem and
even a national problem that this is allowed to happen."

This is the story of how Jose Cruz, Paul Marshilonus, Denise Dixon and hundreds of others
like them across the city of Chicago and beyond are working to stop certain unethical lending
practices called "predatory lending," which have devastated neighborhoods during the last
decade. This is just the latest incarnation of the perennial problem of access to credit for
working families who may struggle at times to make ends meet, but who make up the heart
of many neighborhoods.

How predatory lending came to the community's attention

The booming economy of the 1990s was not as good to many hourly workers as it looked in
the media. But interest rates were low, and no one was particularly looking for high
foreclosure rates. Still, most Chicago community organizations have a long history with
mortgage-lending issues and abandoned houses, and when signs of a problem began to show
up, people across the city took notice.

In the summer of 1998, several staff members at the National Training and Information Center
(NTIC) were monitoring a federal loan program for first-time homeowners, run through the
Federal Housing Administration (FHA). Founded in 1972, NTIC is a training resource and
research center for community organizations around the country. It helps groups uncover
common interests and work on local issues that require national action. NTIC played a major
role in the passage of the federal Home Mortgage Disclosure Act and the Community
Reinvestment Act in the 1970s.

"We were monitoring FHA foreclosures," says Jason Kiely, who began working with NTIC
in 1996. "We were nibbling around for different sources so that we could analyze the patterns
a little bit better. We found a private company selling a computerized report that lays out all
the foreclosures filed in a particular week. It's used by ambulance-chasing lawyers as well as
predatory lenders and individual investors who want to buy a foreclosing property. It gives
the borrower's name and address and loan amount, balance amount, and in some cases
interest rate. We were finding a lot of the loans that were in foreclosure had just been
originated the last couple of years and they had a really high interest rate.

"We started calling around to the community groups we work with to get more information.
We went to Neighborhood Housing Services of Chicago, who do more hands-on work with
homeowners, and found that a lot of their energy had shifted from encouraging
homeownership to protecting homeownership. They were spending more time on the phone
with lenders trying to renegotiate some of these loans than they were spending on new loans.
With their help, we got together groups of homeowners, largely on the south and southwest
side, where the problem was particularly bad."

Homeownership and strong communities are two of
the central goals of many neighborhood-based community organizations. If
homeownership is part of the American dream of the good life, fair access
to credit is a critical step along the path.

Community organizations across the country have
worked hard for several decades to develop tools to ensure fair access to
credit in every neighborhood in the United States. The Home Mortgage
Disclosure Act of 1975 was one of the first steps. It requires lending
institutions to report where they make loans, and provides a vital tool
for community organizations to investigate whether lending institutions
are “redlining” neighborhoods, or systematically refusing loans based
solely on addresses within certain, often minority, communities. The
Community Reinvestment Act of 1977 requires banks to make loans and
provide services in the same area where they draw their deposits, and
provides for community input when financial institutions merge or make
certain other changes in their services.

Meanwhile, in the neighborhoods, the vacant homes were coming to the notice of community
residents.

"I had just bought a home in Marquette Manor, and within a couple of years, I started seeing
some very disturbing figures about foreclosures in the area," recalls Helen
Jouzapavicius, a
member of Nativity BVM Parish and a leader in the Southwest Organizing Project. "The
Greater Southwest Development Corporation and the local NHS office told SWOP there
were approximately 350 to 400 foreclosures surfacing in the neighborhoods we cover. I
became very concerned because I realized that perhaps my investment was going to be
threatened. I went out in my car and started going street by street, from 71st to 63rd and from
Western to Kedzie. I was jotting down notes--there were already 37 buildings that were
boarded up just in that square mile. Two of them were on my own block.

"I felt that it was even graver than the numbers said, because the boarded-up buildings meant
that we would have a concern with safety, people moving out, instability in the neighborhood.
It was a community issue. Something had to be done."

Jouzapavicius reported her findings to the SWOP Strategy Team, the organization's
leadership body. The team asked the SWOP Housing Committee to look at the problem.

Lori Roth, a member of St. Rita Parish and a fairly new SWOP member, recalls that everyone
assumed at first that FHA (a HUD agency) was a part of the problem. But this turned out to
be untrue.

"As we continued to look into the situation," Roth notes, "we found that HUD wasn't our
major problem. As the vacant houses kept popping up, the majority of them were not HUD
houses. Mortgage companies owned the majority of them. So our direction at that point had
to change."

By the fall of 1998, the research from several sources was beginning to come together. NTIC
worked with NHS to bring together small groups of homeowners who were in foreclosure
due to predatory loans. One of the target areas was SWOP's community, Chicago Lawn and
Marquette Park, due to the concentration of bad loans there.

"We brought small groups of homeowners who were in default together," says Kiely. "They
all had the attitude, 'I deserve it… I was stupid.' Peel away the layers and you find out that
they weren't stupid, they were desperate. The furnace wasn't working, winter was coming
on and they needed a loan to fix it. Or they were in the hands of a very good salesman. We
talked to one self-described former loan shark who has gone to the honest work of selling
cars. He told us that some of them, including himself, are so good, he actually got a real estate
lawyer to sign for a loan which included 13 percent of the loan amount in fees."

"The homeowners at our meetings were amazed to find out that it wasn't their fault and they
weren't alone. Then they got mad and wanted to do something about it."

Community research

In September 1999, NTIC produced a 56-page study on predatory lending practices, "Preying
on Neighborhoods: Subprime Mortgage Lenders and Chicagoland Foreclosures." This report
defined the problem and practices of predatory lending, provided numbers to demonstrate the
growing problem of foreclosures, and included examples of people who had been victimized.
Maps with vivid red dots dramatized the growth in foreclosures throughout the Chicago area
between 1993 and 1998. "The key finding is that today's foreclosures are qualitatively
different than they have been in the past. The loans that are failing in ever-greater numbers
are loans made at higher interest rates--interest rates that no longer follow an important index
of what these rates ought to be for customers with 'good' credit."

In November, the Woodstock Institute, a Chicago-based nonprofit research and policy
organization that focuses on community reinvestment and economic development, put out a
similar study, "Two Steps Back: The Dual Mortgage Market, Predatory Lending, and the
Undoing of Community Development." Woodstock particularly highlighted the impact of
predatory lending in the African-American community and the segmentation of the finance
market by race. "In 1998, 58 percent of conventional (not government-guaranteed) refinance
loans in predominantly African-American neighborhoods were made by subprime lenders,
compared to less than 10 percent in predominantly white neighborhoods." The Woodstock
research cited as causes the growth of aggressively marketed consumer credit, increased
consumer debt, the growing numbers of lower-income first-time home buyers, a proliferation
of information technology that allowed sophisticated use of data and inadequate enforcement
of existing CRA and fair lending laws. Woodstock made a number of specific policy
recommendations to remedy the situation.

The national ACORN office also issued a report in November, titled "Stripping the Wealth."
It compared the lending patterns of prime lenders with those of subprime lenders, and found
that in 20 cities around the country, minorities, particularly African Americans, were
disproportionately targeted for subprime loans. In Chicago, while 5.4 percent of conventional
loans were made to African Americans, 29.4 percent of subprime loans went to African
Americans.

NTIC and the Loan Shark Task Force

NTIC, a national organization with some local affiliate groups but without individual members
in Chicago, began by working with NHS to convene meetings of homeowners who were on
the verge of losing their homes due to predatory loans.

"We're not a think-tank, we're a grassroots community organization," says Kiely. "We
needed to get the people who were affected by the problem together, but we knew it wouldn't
be easy. People don't just talk about how they are losing their home.

"We used the foreclosure list to send a flyer to about a thousand homeowners, asking 'Have
you been ripped off by a loan shark?' We invited them to a meeting on the Southwest Side,
because that's where the biggest concentration was. About 40 people showed up. A couple
of homeowners that we had met with previously through NHS were there to lead the
meeting."

An NHS board member, Sharon Robinson, opened the meeting. "We know a lot of folks in
this room are facing foreclosure and we think a lot of it is because homeowners are being
deliberately set up by unethical lenders. They're promising the world and setting people up
for bankruptcy, foreclosure, and hopelessness."

Heads around the room started to nod.

Kiely knew they were on the right track. "We realized it would be hard for people to talk
about, so we started with a little video that told somebody's story. Then one of the
homeowners came forth and struggled emotionally through her story. That broke the ice, and
we spent the next hour listening. Everybody wanted to tell what happened to them. It was a
really powerful moment. People began to look across the circle and say, 'Okay, this isn't just
me, something's wrong here.'"

One of the rules of organizing is that after people have a chance to vent, there has to be some
way for them to take action to make change.

"We knew that you just couldn't get these people together and not have some way to assist
them, especially since they were desperate. We had the NHS counselor lay out some options,
counseling, help from the Legal Assistance Foundation. So that gave some people a bit of an
immediate fix.

"Then I made the pitch. It is important that we all recognize that this issue is not just our
personal problem, and certainly not our fault. Now I want to ask you folks--I know you are
going to use some of these resources to help yourselves, but what do folks think about their
children and their neighbors who are still easy prey to these guys? Do we want to work
together to try and stop them?

"Very quickly into the conversation, there was a sense, 'We'll do whatever it takes.' There
was a conviction that this is wrong and it's got to be stopped. I didn't know if that would
happen or not, because people were in a pretty darn bad fix. But they wanted to stop it from
happening to other people.

"So that night, we formed ourselves into the Chicago Loan Shark Task Force. Our first major
action was to invite a representative of the Office of Banks and Real Estate (OBRE), the state
regulator charged with overseeing lending practices and policies, to a public meeting. About
100 people came to that meeting, in a hall at 63rd and Talman. The homeowners presented
their case, and really got the brush-off."

Under the current regulations, they were told, they would have to produce a huge volume of
specific information showing a pattern of predatory practices in a particular community before
OBRE would even be interested.

That was like waving a red flag in their faces.

"The next step was to talk to our state legislators because they had power over the regulators.
Maybe we needed state legislation, although that seemed like pie in the sky at the time. We
were just fishing around that summer and putting everybody who had anything to do with the
issue on notice. Our executive director, Gale Cincotta, was well-known from years of NTIC
actions, so she and the Loan Shark Task Force were able to get a meeting with somebody
from Gov. George Ryan's staff and the commissioner of OBRE to talk about the issue. Two
weeks later we got a response that the governor wanted to set up a commission to study the
issue.

"Well, Cincotta's immediate reaction was, 'Don't waste my time, you're not going to stall
us.' Historically it's been our experience that most studies are just to stall. We were not going
to wait.

"So Gale got a meeting with Julia Stasch, Mayor Daley's chief of staff. We kept on spreading
the word about what was happening, to see who would take action."

A Chicago Sun-Times article shortly after the community meeting with OBRE helped draw
attention to the issue. NTIC began work on an investigative report that would spell out the
details and causes of the problem. And it invited other community groups to join together in
a broad coalition to plan for action.

SWOP holds a Posada

Members of the Southwest Organizing Project attended the NTIC meetings. They even went
along on several "shark attacks" when NTIC organized angry homeowners to show up at the
offices of predatory lenders and put them on notice that community organizations would not
allow their neighborhoods to be devastated.

But as a faith-based community organization whose leadership came from local congregations
and a variety of religious backgrounds, SWOP members felt that angry meetings were not
really their style. SWOP is an institution-based organization; its leadership are representatives
from area churches, mosques, synagogues, hospitals, schools and other local institutions. The
leaders are very conscious of representing not just themselves personally, but all of the
families in the institution that delegated them to SWOP.

Educating the people at their member institutions about the problem was an important first
step. Helen Jouzapavicius remembers being challenged by one of the organizers to step up her
leadership role. "I was asked to go and talk to every parish pastor in the area about the issue.
As a lay person, I didn't want to do it, I was nervous. But I found myself knocking on their
doors and talking with them about the gravity of the problem because it was so intense. They
had to know what would happen if we didn't respond as a community."

Betty Gutierrez, a SWOP leader from St. Mary Star of the Sea Parish, saw significant results
from Jouzapavicius' efforts. "Father Stan at St. Nicholas of Tolentine had no idea that he had
so many abandoned houses right around his parish. He had been too busy to really notice.
Carol Riley, about a block and a half from St. Nick's, was living next to an abandoned house.
She lived with constant anxiety and when her grandchildren came over, she didn't let them
play outside. Her family was going to put the house up for sale. Then our organizer, Bill
Black, knocked on her door. Mrs. Riley told him that she felt totally isolated. She didn't know
anybody on the block any more. After Bill talked with her, she went door knocking on her
block. For the first time in ages, she knew who was on her block. She and her neighbors
decided to get involved. And she decided not to sell her house."

The Marquette Park area historically was exclusively white. Over the past two decades, it has
slowly been integrating an influx of Hispanic, Arab and African-American residents into the
old Polish, Irish, and Lithuanian mix. The area is seen as particularly vulnerable to sweeping
changes.

SWOP members like to highlight special events from the various cultures represented in the
neighborhood to bring people together. At Christmas that year, they held a posada that
combined the traditional Mexican Christmas liturgical parade with a concern about the future
of decent housing in the area.

Lori Roth remembers that it was bitter cold that day. "Lots of people came out. It was quite
moving to see all these people walking in the cold to an abandoned home. A posada is a
reenactment of the Holy Family looking for shelter at Christmas, going door-to-door and
being turned away, and ending up in the stable. So we knocked on doors, and drew people
out into the crowd with us. Finally, at the last house, we're told, 'Well, you can't stay here,
but see that abandoned house next door, why don't you stay there.' Father Bill Lego, Pastor
of St. Rita's, led a Spanish liturgy and we prayed for safe shelter for everyone in our
community."

The Sisters of Saint Casimir were also asked to get involved. They have been in the
community since 1911, and run Holy Cross Hospital and Maria High School, near Marquette
Park.

"We've lived in this neighborhood for a long time, and have a significant investment, and
we've seen the abandoned houses, just like everyone else," says Sister Regina Dubickas. "Our
community has never become involved in politics or issues like this. We were focused on
religion and our own institutions. When SWOP came to us, there was some resistance. The
sisters have seen other religious communities that are very actively involved in political work.
They get arrested and things. Are we going to get in trouble? What's going to happen? But
we knew it was important."

The Sisters were asked to lead a prayer vigil outside the offices of the Associates, one of the
lenders accused of making predatory loans in the neighborhood. People who were afraid
themselves would come out to support the Sisters, to be sure they did not hold the vigil
without the community behind them.

About 17 Sisters of St. Casimir, in their religious habits, showed up at the Associates office
on the appointed day. "We were afraid," remembers Sister Regina. "But we did it, and we
were just amazed at what could happen when you unite. About 200 people came out and
joined in the vigil. I can't tell you how important the experience has been for us. A number
of people have come to me personally and said, 'I became involved because I looked out and
I saw some Sisters marching and I thought if they're doing it, it must be good.'"

ACORN goes after the financial institutions

Chicago ACORN went after the problem somewhat differently. ACORN works in very low-income neighborhoods in Chicago, including Englewood, West Englewood, Little Village and
Lawndale. The organization finds its members by going door-to-door, not through institutions
such as churches. Both locally and nationally, ACORN has a long history of demanding that
financial institutions deal fairly with low-income people. It had been hearing about lending
problems from constituents for some time.

Predatory mortgage lending was seen as one more way that outside interests were sucking
dollars out of poor communities. There are few, if any, banks and other traditional financial
institutions located in these neighborhoods. Many residents view banks as unlikely to serve
their needs, and so keep their money at home. The loan sharks fed on this suspicion, says
ACORN state president Dixon.

"Our people were easy prey. They already have a fear that they can't go to the bank, and then
somebody comes right to their house and tells them, 'Oh, you're not going to find a better
deal than what I'm giving you, no bank is going to lend to you.'

"They will drink your coffee, play with your dog, and give your child candy, and you'll sign
on the dotted line. You don't have to go anywhere, they'll come to you, especially the
seniors. 'No, no, you don't need a lawyer. I wouldn't cheat you.' That's how they prey on
people."

ACORN organizers began to hear from members who were worried about losing their homes
to high-cost loans. They asked around, 'Has anyone been contacted by phone or mail about
loans?' They found that many people were being flooded with solicitations. The ACORN
national research department was able to tell the Chicago office which lenders were doing the
biggest subprime business, and which neighborhoods were most affected. Household and
Ameriquest were identified as the first targets.

Coincidentally, about this time, November 1999, the National Home Equity Mortgage
Association was meeting in Chicago at the Hotel Continental.

"Our declaration of war against predatory lending took place at the Hotel Continental," says
Dixon. "We showed up with a busload of people. The room they were meeting in had
chandeliers hanging down, the crystal glassware, everything. They're all sitting there in suits,
and everybody has a laptop, and they're ready to divvy up our area. That's what they were
doing, in my opinion.

"And here we come, about 50 people, all of color. They panicked. They tried to shut the
doors. We got in and went right to the podium, which was not being used at the time. I
delivered our demands, that we wanted them to stop charging exorbitant fees. We wanted
them to stop targeting our neighborhoods. We wanted a code of conduct for their activities.
They thought it was unreasonable, but we didn't. We still don't.

"Eventually, we were ushered out by the police."

ACORN generally launches a new campaign with this kind of direct, face-to-face
confrontation, according to Madeline Talbott, head organizer for Illinois ACORN.

"We needed this meeting to accomplish two things. First, we had to raise the public profile
of predatory lending and make it a household word.

"Second, we had to create a new understanding. Until this point for many people, including
our own members, predatory lending was a personal problem that didn't have a name. 'I have
a loan that I can't afford to pay and I don't know how to get out from under it. I feel like I've
made a big mistake or I'm getting ripped off, but I can't understand what is happening to me
exactly.'

"The essence of organizing is to convert personal problems into public issues, so that people
can see there is a shared problem. At its core, it's not about me making a mistake, so much
as it is about a huge class of people being exploited. That intersection between biography and
history is what organizing is all about."

Dixon recalls that the meeting at the Hotel Continental transformed the outlook of many
ACORN members.

"It had to be public, where everyone could see it. People came forward with their stories,
people we didn't know even had predatory loans. They wanted to tell these lenders about the
results of their work. After this action, people felt empowered."

ACORN then began holding public meetings with elected officials, asking them to take action
addressing the issue. The group got Ald. Ted Thomas to agree to introduce a city ordinance,
and met with State Rep. Dan Burke and State Sen. Barack Obama about state legislation.

But most of the organization's energy went into the area where it expected the most results:
direct action against financial institutions that were engaging in predatory lending.

Adam Lang, ACORN's anti-predatory lending organizer in Chicago, says it was easier than
following the legislative route. "We went after Ameriquest on a national level because they
were one of the top 10 subprime lenders. It's a lot easier to go against the industry by letting
people know what they are doing so that they lose business than it is to go against a united
banking lobby and fail in the legislature.

Many Americans assume that there are limits to the
amount of interest that financial institutions can charge. However, these
were eliminated during the bank deregulation of the 1980s. Interest rates
on mortgage loans, credit card balances and payday loans can be as high as
the market will bear. What may seem unethical is not necessarily illegal
in the current regulatory environment.

"Because we are part of a national group, ACORN organizations all over the country did
protests on Ameriquest, putting their name in the press talking about the kind of loans they
were selling to people. They finally had to meet with us because they were losing some of
their Wall Street financing due to all the bad press.

"We entered into an agreement with them. In 10 ACORN cities, they would work with us to
make sure people who didn't qualify for conventional loans could get decent subprime
products. They set up a resolution line so people who had problems could clear things up."

Talbott stresses the need to deliver results directly to the membership. "For a membership
organization, this is not just about policy. Policy has to allow you to deliver real goods to real
people in the neighborhood. We had to create some products that were viable alternatives to
the kinds of things that people were being offered by predators.

"We also negotiated with Bank One to get a product. This came out of an earlier fight over
the acquisition of First Chicago. Through the heat of that battle, in 1998, we had forged a
good working relationship with Bank One. The only way to build a lasting relationship is with
mutual respect. We don't have a whole lot of experience of relationships with corporations
that are based on just going in and having a good conversation. This is all about power. If we
are doing our job, we are changing the balance of power."

In addition, ACORN went after Household during the summer of 2000. Lang spearheaded
the effort in Chicago.

"ACORN did national 'days of action' in 35 cities around the country. Our members went to
local Household offices and took them over. Our demand was that the local office send a fax
to the chief officer of Household demanding meetings and to reform their practices on a
number of issues.

"We wouldn't leave until they sent the fax. Sometimes, the police would come. In some of
these cases in Chicago, the police have said, 'You know what, these guys are mean to us,
too.' The police sided with us and were looking to help, instead of just getting us out of there.

"We said we can't leave until we get this faxed. The police tried to negotiate with the office
manager to fax it, and they wouldn't do it. Finally, the police took our letter, dialed the
number, faxed it through, called to make sure the national office got the letter and said,
'Okay, you guys can leave now.'"

Ameriquest, Household, and Citibank, which had just bought the Associates, all stopped
selling single premium credit insurance. This insurance often costs as much as 10 percent of
the loan amount, and is added as a fee to the principal. It generally has a short term, perhaps
three years, after which it expires, but the homeowner pays for it over the full 30-year term
of the loan.

Helping the victims: The Northwest Neighborhood Federation

The Northwest Neighborhood Federation (NNF), which represents a multiethnic area of
working-class people in the Belmont-Cragin and Avondale areas, took an entirely different
approach to the issue.

"We had received information about the problem from NTIC," recalls the Rev. Christine
Schrey, pastor of Christ Lutheran Church and head of the NNF anti-predatory lending
committee. "Initially we started looking at the state legislation that would prevent predatory
lending. We asked our local legislators to support that, but it did not get passed. Then we
shifted focus. We got to be known as the 'red dot' people, because we have a map that has
red dots on it for all of the foreclosures that have been started in our area. Looking at the
people who are being foreclosed on, and pushed out of their houses, when they are working
and struggling to make their payments, we chose to work with people who are in the midst
of the problem, rather than work on prevention."

"Many of the people in our community have too much income to be eligible for help from the
Legal Assistance Foundation and other sources. So the first thing we did was to call some of
the major banks together--Harris, LaSalle, Bank One and Citibank--and ask them to produce
an alternative product, for someone who is in the midst of a predatory loan to be able to go
to a conventional bank. The only bank that said they would do anything is Harris. They came
up with an alternative product in August 2000, but no one has been able to qualify. For this
loan, Harris is quite liberal in their eligibility criteria, but we are dealing with people who have
foreclosure on their records. The banks are looking for somebody who had good credit, and
then got into a predatory loan. There are generally a lot more complications."

The other banks were reluctant to get involved unless Fannie Mae was in the picture, to buy
the loans from the banks in the secondary mortgage market. (Fannie Mae is a private
company created by the government to increase the availability of mortgage funds,
particularly for low- and moderate-income people, by purchasing loans from other lenders.
This replenishes the original lenders' supply of capital and takes the loans off their books.)

"Fannie Mae came out with a refinance product a year ago, but only half a dozen loans have
been made. Often, people threatened with foreclosure go to a lawyer, who recommends
bankruptcy. That adds another complication to securing any kind of new loan," says Schrey.

"Fannie Mae and Harris are very solid partners working with us, but it's not an easy solution."

In July 2001, NNF started working on a program modeled after the Home To Stay project
in the Twin Cities. "It combines a refinance product with money for rehab and affordability
gap financing, plus education and counseling altogether in a package to try to help people.
We realize with our own people that rehab is a crucial element. Often people get stuck with
predatory loans because the house needs urgent repairs. So all those elements need to be there
for a person to be able to successfully stay in their home," Schrey says.

The project in Minnesota has closed about half of its expected 50-55 loans. Church pension-fund backing (from the Evangelical Lutheran Church in America and the United Methodist
Church) has been a crucial element in making the loans possible.

"We're just at the beginning stages of this," notes Schrey. "We need people who can think
outside the box, and are willing to make a commitment. It doesn't begin to meet the need, but
it could help some.

"When we look at the people around the table at our meetings, how can you say to them that
prevention is what matters and not taking care of them now? These are our neighbors, people
who work hard, people who pay their bills, these are not people looking for a free ride. I think
that's why we've chosen this path."

The first attempt at passing a state law

Meanwhile, NTIC was building the membership of the Illinois Coalition against Predatory
Home Loans. In addition to SWOP, the South Austin Coalition Community Council had
joined, since its community was hard hit by foreclosures, as had the Central Illinois
Organizing Project, which represented the downstate region including Bloomington/Normal,
Champaign/Urbana, Springfield, Decatur and Danville. Neighborhood Housing Services and
the Woodstock Institute were also participating. State Rep. Burke, whose district included
the heavily affected parts of the Southwest Side, was showing interest in sponsoring
legislation to address the problem. He attended a coalition meeting and agreed to hold public
hearings.

Burke introduced a bill in the Illinois General Assembly in January 2000. The basic structure
followed existing federal law, which says that if you price a loan above a certain cost there
are extra safeguards that come into play, mostly extra disclosure forms to the borrower. By
the end of the legislative session, more than 75 community groups, several cities (including
Chicago), and some statewide associations had joined the coalition and were supporting
Burke's bill.

"Some groups put a lot of energy into this bill, but we didn't think it had much prospect,"
says Dan Immergluck of the Woodstock Institute. "In North Carolina, they were able to pass
the legislation before the banking industry fully realized what was happening. Every time we
would talk to a legislator about the bill, they would say, 'What does the Illinois Bankers
Association (IBA) think about this?' The IBA was very motivated to stop the bill. Neither the
Republicans nor the Democrats were going to stand up to them.

"We turned our attention to the city, where Mayor Daley was beginning to move on an
ordinance."

The city takes action

A number of organizations were starting to think about action at the city level. Financial
institutions are regulated by states and by the federal government, so there was a limit to what
could be accomplished by the city. However, the community organizations felt that raising
visibility at the city level would put pressure on the state legislature. There is also a
longstanding practice of starting locally, where it is easiest to get action and to involve
grassroots people, and then moving to the larger coalitions that are needed for effective action
at the state and national level.

ACORN had been working with Alderman Ted Thomas, whose ward covers large parts of
Englewood and Marquette Park, to put together an ordinance expressing the support of the
Chicago City Council for Burke's state legislation. Late in 1999, this went to the council's
Finance Committee, coincidentally and helpfully chaired by Burke's brother, Alderman Ed
Burke, also of the Southwest Side. Numerous community members testified, and the city
council eventually passed the ordinance unanimously, asking the state to take action.

Thomas had also worked with ACORN to put together an ordinance saying that the city
would not do business with financial institutions that engage in predatory lending. Since the
city moves large amounts of money through various bank accounts in the course of its normal
business, this type of initiative would have some impact, although it would not have the broad
regulatory power that state or federal legislation could.

At the same time, the city of Chicago itself was taking active notice of the issue.

Julia Stasch, Mayor Daley's chief of staff at that time, recalls that the city was hearing about
the problem from two directions. "It was becoming apparent through the advocacy and
information from NTIC and Woodstock and others that there was an increasing number of
foreclosures, with linkage to certain kinds of lending practices. At the same time, people in
the Building Department were seeing an increasing number of abandoned homes, being held
by lenders who did not typically have the practice of maintaining a board-up, keeping the lawn
mowed and otherwise keeping the home from being an eyesore, perhaps open and a magnet
for crime. There was an emerging sense within the city government that this was a problem
not just from the personal dimension of individuals whose lives were negatively impacted by
this, but the negative impact on communities as well.

Despite the booming economy of the last decade,
subprime lending in Chicagoland increased by 1,524 percent between 1991
and 1997, from 3,137 loans to 50,953 loans. Simultaneously, foreclosure
rates on these loans skyrocketed, from 30 in 1993 to 1,417 in 1998, or 36
percent of all area foreclosures in that year, up from only 1.4 percent.
“Subprime” is the name given to the loan market for borrowers with
blemished credit.Some
subprime lending gives access to credit, at a higher price, for people who
have not had perfect credit records and could not otherwise qualify.
“Predatory” lending occurs when these loans include excessive fees,
unjustifiably high interest rates, high-pressure sales tactics and
deceptive practices. The majority of the predatory market involves people
who have equity built up in a home they own, and are persuaded to cash it
out at a very high interest rate when they hit a period of financial
difficulties. This puts them at high risk for losing their homes. (From
“Preying on Neighborhoods: Subprime Mortgage Lenders and Chicagoland
Foreclosures” by the National Training and Information Center.)

"We took the initiative to say that we would draft an ordinance asserting that the city would
not do business with lending institutions that participated in predatory practices. There was
precedent for it in the anti-apartheid ordinance, which said that all vendors doing business
with the city were required to assert that they would not do business in South Africa. Not to
say the problems were equivalent, obviously, but it gave us a precedent."

The city put together an ordinance that was introduced into the council in March 2000,
basically replacing Thomas' bill. Although the city did not have regulatory power, a number
of the community organizations felt it was crucial to pass a very strong resolution and worked
hard toward that goal. The Woodstock Institute, in particular, focusing on national policy,
realized that this would be the first city ordinance in the country addressing predatory lending
and would serve as a model to other cities and community groups, much as the North
Carolina legislation had at the state level.

Passing the resolution was not easy, even though it came from the inside.

Alderman Ed Burke held numerous hearings, and community representatives turned out to
testify. By this point, however, the banking industry had caught wind of what was happening.
The Illinois Bankers Association sent its lawyer to testify that the resolution would not only
hurt the banks' business, but keep people in need from getting loans.

Stasch held a series of meetings to clarify positions. "The city's chief financial officer and
others that were going to be charged with implementing the ordinance needed to really
understand the perspectives of both advocates and lending institutions that would be affected
by the ordinance."

Community groups were becoming increasingly frustrated. "Every single month between
March and August, we thought the council was going to pass the ordinance," recalls Kiely.
"They held hearings every month, and community groups were turning out people. The night
before, we'd get a call--not this time, we can't pass it yet."

NTIC finally became fed up with the delays. Amalia NietoGomez, a young NTIC staff
member who took over the city campaign at this point, says the badgering from the lawyer
for the IBA was the last straw. "'Isn't this what you worked for on CRA?' he would ask.
'Don't you want people getting loans?' Not these loans we didn't. We actually started calling
it 'reverse redlining' because instead of not making any loans, they're making too many bad
loans.

"One day we just had enough. There's another phone call 5:30 at night, 'We're really
sorry--it's not going to go through tomorrow.' We went to the council hearing the next day
and stayed just long enough to know for sure that it wasn't going to go through. The Illinois
Bankers Association is two blocks down the street from City Hall. We asked the other
community groups, 'Wanna go with us?' Suddenly more than half the hearing audience got
up and left. About 60 of us marched down LaSalle Street to the IBA office.

"We all went up the elevators and into their office, and demanded to see the IBA lawyer. Of
course, some official guy came out and told us we had to leave. As our spokesperson talked
to him, our other people are dropping the foreclosure maps on the workers' desks, and telling
them, 'You work at a place that does this!'

"One office where we held a protest around that time had plaques on the wall recognizing the
salespeople who got the highest fees on a loan. Like, John Smith, $25,000, and the date. They
were proud of it."

NTIC saw this kind of action as putting additional pressure on the city and the IBA members
to come to an agreement on the city ordinance, a kind of "warning shot" of what they could
do if the legislation did not proceed.

Meanwhile, the Southwest Organizing Project was following a very different strategy. With
the assistance of the Greater Southwest Development Corporation (GSWDC), one of their
member organizations, SWOP took photographs of all the abandoned houses in their area,
put them on a CD, and presented the CD to the Department of Housing. In April 2000,
Mayor Daley held a press conference on the Southwest Side about the predatory lending
issue. Landlords who owned abandoned houses in the area were brought into Building Court.

"It was like a roller-coaster ride," remembers Betty Gutierrez, who works for GSWDC and
is on the SWOP Housing Committee. "Just as we thought it was going to be brought up in
City Hall, the bankers would get to somebody. But we persisted, and finally in August it
passed, after months of work."

The legislation that passed the city council in August 2000 omitted one key provision that the
community groups had been fighting for: a prohibition on single premium credit insurance.
All of the community organizations opposed single premium insurance as a major predatory
practice, but some saw its omission from the city ordinance as a deal-killer, while others did
not.

"At some point I think our strategy became… get it done!" says Matt McDermott, SWOP's
executive director. "It's all symbolic, since we knew from the start that it would keep only
a few lenders from doing this. The city legislation was not the key arena."

SWOP felt it was getting the best available deal from Ed Burke, who was someone with
whom they wanted to maintain a long-term relationship. This was August 2000, and the
presidential election was heating up. At one point in the negotiation, Burke held up a copy
of Time magazine with Robert Rubin on the cover. Rubin was chief fundraiser for the
Democratic Party nationally, as well as head of Citibank, owner of Associates, one of the top
targets of the predatory lending campaign. Burke, as a good Democrat, was unwilling to
implicate Rubin. SWOP agreed to the compromise Burke offered. NTIC saw it as Democratic
cronyism.

"We knew this put us in a position of responsibility," says Bill Black, an organizer for SWOP.
"We realized we had an obligation not to be easy sellouts, but at the same time negotiate as
strong a deal as we could. We'll take what we can get today and we'll be back tomorrow for
more. That's how we look at it."

Talbott says ACORN saw it very differently. "At the time, we were trying to get the Federal
Reserve nationally to take a position against single premium credit. We viewed it as a terrible
precedent that the first city ordinance in the country was going to leave out single premium
credit insurance. It was worse than passing nothing. We were aware that Woodstock was
taking a position against the city legislation, and we joined them in that effort."

Stasch believes that the net result of the community efforts was positive. "The community
groups were very consistent in their message that this was a problem of potentially enormous
human dimensions. They took the continuing stand that law and regulation, whether it was
city, state, or federal action, needed to be as aggressive as possible. They were on the ground,
and saw day-by-day the people who were actually affected by this bizarre lending instrument.
So I think they were doing their jobs as advocates. I think that the cumulative effect of city
and state action and continuing advocacy by the community organizations resulted in a
number of the big players actually getting out of the business."

The state law, part two: Regulation

Meanwhile, back in spring 2000, State Rep. Burke's bill had died in the Assembly due to
opposition by the financial industry lobbyists. Some of the community organizations felt that
House Speaker Michael Madigan could have gotten the legislation passed if he had wanted
to, but that he did not want to antagonize the banking lobby. Others thought he did not
pursue it because the legislation would have had little chance in the Republican-led State
Senate.

Most of the community organizations had given up for the state legislative season, and turned
their attention to the city ordinance.

Only SWOP really continued the state effort. It had forged a relationship with Madigan, who
represented a district that was in the SWOP area.

"We began to deepen our work on this issue in the institutions in Madigan's district," recalls
Black. "St. Mary Star of the Sea, Queen of the Universe, St. Nicholas of Tolentine. Some of
the church members and our SWOP members were Madigan precinct workers. The message
got back to Madigan that neighborhood people were still active on the issue. All of a sudden,
as the legislative session was winding down, we got a phone call from the Speaker saying,
'I'm very concerned about predatory lending.' He invited us to a series of meetings
downtown."

Madigan set up a committee of consumers, community organizations and members of the
banking industry, headed by retired Judge Michael Getty, to see if any agreement could be
reached before the legislative session ended in June.

Immergluck of the Woodstock Institute felt that the committee was dominated by the banking
industry. "We weren't invited, and frankly, we had pretty much written off a legislative
solution. We thought the Getty committee was a waste of time. They were focusing on
consumer education."

NTIC attended the first meeting, and then did not go back. ACORN thought that nothing
would happen of any substance as long as the entire banking industry was opposed.

The Getty committee eventually decided that the responsibility should be passed off to the
governor and the regulatory agencies. A short bill was drafted and passed the legislature in
May, giving the Department of Financial Institutions (DFI) and OBRE the authority to
improve consumer protection. As with any state action, it would only apply to mortgage
lenders and brokers and state chartered banks; the many banks that are nationally chartered
are not subject to state regulation.

SWOP hosted a big celebration at its annual convention in May 2000, with Gov. Ryan and
Madigan in attendance, along with 1,200 community residents. For a five-year-old
organization, the victory was a very big deal. The other community groups were less than
impressed.

A real victory was far from assured. The process called for the state bureaucracy to issue
proposed regulations. A legislative committee would hold hearings, and the Joint Committee
on Administrative Rules (JCAR), made up of six state representatives and six senators, would
vote whether to approve the proposal. SWOP realized that this made Madigan's support even
more crucial: six of the votes were Democratic, and two positions were vacant at this point.
Madigan had the power to appoint the people who would fill them.

Ryan released a set of proposed regulations later in the summer that primarily called for
consumer education, and prohibited only a couple of the worst practices. The community
organizations, SWOP included, unanimously rejected these regulations, calling them virtually
worthless. NTIC released a five-page letter trashing them; organizations held a press
conference denouncing the proposal. Obama, a Democrat from the South Side of Chicago,
attended the press conference and announced his support for strong regulations. Significantly,
he was the co-chair of JCAR.

A meeting was set up between the governor and the community organizations, but there was
no immediate progress. Ryan said he was watching the progress of the city ordinance.

Some organizations felt the regulatory route would never provide useful protection and was
primarily a legislative cop-out; others such as SWOP kept plugging away.

After the city ordinance passed, Ryan got serious about predatory lending. In December, he
issued a set of proposed regulations that mirrored the city ordinance, as it had been originally
written, with the prohibition of single premium credit insurance that had been removed before
passage through the city council. Everyone sat up and took notice.

Stasch emphasizes the impact the city action had on the state process. "I think that it would
have been very unlikely for the state regulation to come out the way it did had the city not
taken initial action. The city ordinance gave the governor a platform from which to build his
own position, which he, in fact, acknowledged."

ACORN jumped back into the fray, as did Woodstock Institute. Both felt it was strategically
critical to split the banking industry and find some support for the regulations.

"At this point," Talbott recalls, "the lending industry was united in support of predatory
lending, which was a ridiculous position for the conventional lenders to take, we thought, but
one that they took nevertheless. We felt it was luck that Gov. Ryan had issued such a strong
set of rules, and we wanted to see it pass. Gov. Ryan was doing a number of innovative policy
moves during this period, including the death penalty moratorium, perhaps because he was
up to his ears in scandal and was looking for good press. We don't know why, but we were
grateful, and we jumped into action. There was still a hell of a fight to get the regulations
through. But at this point, you have the governor on your side. That's not enough, but it sure
doesn't hurt."

The good thing about the process was that it would take a majority of the 12 JCAR votes to
stop the governor's proposed regulations. In other words, the community groups only needed
six votes.

Immergluck remembers that Woodstock engaged with a new seriousness in the state process.
"A number of groups started meeting regularly at this point, to coordinate our work. SWOP,
Neighborhood Housing Services, some others. I tried to keep an extended network clued in,
groups like the Chicago Fair Housing Alliance and the Leadership Council for Metropolitan
Open Communities.

"We did a big campaign to get letters of support for the regs to the agencies. We faxed a
boilerplate version out to 150 groups. About 100 groups submitted comments.

"Then we needed to do a press strategy. SWOP had hired an expert to do press work, and
it was very helpful. The coalition leaders met with the editorial boards of the Sun-Times and
the Defender, and then the Chicago Tribune and Crain's Chicago Business, and we got a
good hearing and some good editorial support.

"To take the wind out of the sails of the financial institutions, we needed a breach in the solid
wall of opposition, we needed at least one bank to support us. We needed to be able to say,
'The IBA is against it, but they don't speak for everyone.' We didn't have a lot of time. This
was February, and comments were due in March. Ideally, we wanted to have some banks to
comment in favor.

"A number of us discussed which banks we thought were most likely. We wanted to know
exactly what the bank opposition was, if they weren't going to support the regs, not this
industry blather about ideological opposition to any kind of regulations, which is what the
lobbyists were giving us.

"We narrowed the three likely suspects to Northern Trust, Harris and LaSalle. They were the
ones that people had good relationships with, and had a strong local presence. We asked for
a meeting. SWOP was there, and NHS, and the Greater Southwest Development
Corporation, and the Leadership Council and us. We said, 'We would like you to support
these regs, but if you can't, we want to know specifically what the issues are.'

"So they went to work on it. Eventually Harris gave us a list of 20 problems. But 17 of them
were just language changes, really minor. Three were significant. LaSalle added one more.
Northern had the same list as the others.

"We had a second meeting and some dialogue back and forth. Two points were resolved and
there was just the one point left. A significant one, but if they sent a letter saying, 'We like
everything but this one bit,' that was going to be pretty powerful. And they did. The banks
wrote a joint letter. They said this is the only thing we really object to. The IBA, of course,
said, 'Look at these 20 things that they don't like,' but the wall was breached."

ACORN, which had been having its own behind-the-scenes conversations with the banks, saw
the split in the banking industry as absolutely key to passage of meaningful regulations. It
allowed legislators to vote for the regulations while still claiming the support of some of the
banks, thus not appearing anti-industry.

SWOP continued its grassroots efforts, holding meetings with most of the 12 legislators who
were JCAR members, including those outside the city of Chicago, as did NTIC. SWOP
members launched a congregation-based campaign to collect postcards calling on JCAR
members to support strong regulation. The cards were addressed to JCAR members, care of
Speaker Michael Madigan. Eventually, SWOP would deliver 10,000 signed postcards.

A public hearing was held in February in Chicago, and several hundred people turned out on
a weekday afternoon.

NietoGomez recalls that the community coalition produced more than 250 people
representing a number of groups. "There were about 25 people who wanted to testify. The
hearing was supposed to last from 1 to 5 p.m., and the regulators insisted that they wouldn't
stay past 5. But these homeowners are telling their stories and pouring their guts out about
how predatory lenders screwed them, and there was no way the regulators could cut them off.
The meeting went late, and we felt we had good momentum at that point. But we still didn't
know how the vote in Springfield would turn out."

Throughout the remainder of February, March, and into April, community groups went to
Springfield regularly to meet with their representatives, to demonstrate the level of support
for the regulations, and to keep everyone on notice that this issue was important.

As the date neared for the final vote in Springfield, Norman Bobins, the CEO of LaSalle
Bank, decided that more action was needed to support the regulations. He wrote an op-ed
piece that was published in the Chicago Tribune on the day of the vote (4/17/01). "From time
to time practices take place that are so shocking that they are nearly unbelievable," he wrote.
"Most financial institutions, in fact, are stunned to find out that these loans are legal…. If we
don't solve this problem now, it is no exaggeration to say that we will undermine the last 50
years of progress in homeownership and community stabilization." He went on to explicitly
call for the passage of the regulatory changes by JCAR. The community organizations made
sure that all the legislators saw the article.

The hearing room at the State House was packed for the final vote, on April 17, 2001. The
community organizations felt they had done all they could, but they still did not know for sure
which way the vote would go.

SWOP members had met with Madigan the day before, and were feeling more confident.
Uncharacteristically, Madigan attended the JCAR meeting and watched the proceedings. He
delivered the box of 10,000 postcards to the hearing room in a big box marked "SWOP."

The final tally was 8-4, with two Republicans joining all six Democrats in supporting the
proposed regulations.

The work is never done

It was the culmination of several years of hard work, and the community organizations felt
the victory was sweet. They took time for a round of celebrations, but knew that their work
needed to continue.

The mortgage brokers filed a lawsuit trying to stop the regulation, claiming that the state was
usurping federal authority. The court found against them in fall 2001, upholding state
regulation.

NTIC, SWOP, the South Austin Coalition and Nobel Neighbors, a group in the Humboldt
Park area, won state agreement for a pilot outreach program to homeowners in four of the
ZIP codes hardest hit by predatory practices. OBRE committed to mail information about
predatory lending practices to every current mortgage holder in the four target areas, along
with a letter from the local community organization expressing concern, and a complaint
form. In addition, OBRE agreed to examine five specific mortgage lenders for predatory
practices.

Betty Gutierrez, from SWOP, has been appointed by Gov. Ryan to the Illinois Residential
Mortgage Board, which monitors and advises OBRE, so the community organizations now
have an inside voice.

ACORN has been focusing on securing refunds of credit life insurance premiums for
homeowners. By law, people are allowed to cancel these policies at any time, but most people
don't even realize that the policies were added to their mortgage. To date, Chicago ACORN
has helped homeowners secure 10 refunds from Household, for amounts ranging from $500
to $8,000. A class action lawsuit was filed in February 2002 by ACORN in California asking
that Household be forced to refund all fees and points on predatory loans, and that
homeowners be allowed to refinance at a lower rate.

Regulations are only as good as their enforcement, and there is much still to do before
homeowners will be safe from predatory lending practices. The community organizations and
their leaders have gained strength through the campaign. Many of the victims of predatory
loans no longer suffer in silence, and people are defending their communities.

SWOP member Jouzapavicius recalls how frightened she was the first time she addressed a
big crowd, at the annual convention in 2000, with Gov. Ryan and Madigan in attendance. "I
was trying to figure out what I could say. I had heard all the stories about seniors who were
losing their homes. Finally, I just asked the people, 'We're not going to take it any more, are
we?' And the response was overwhelming." n

Homeownership and strong communities are two of the central goals of many neighborhood-based community organizations. If homeownership is part of the American dream of the good
life, fair access to credit is a critical step along the path.

Community organizations across the country have worked hard for several decades to
develop tools to ensure fair access to credit in every neighborhood in the United States. The
Home Mortgage Disclosure Act of 1975 was one of the first steps. It requires lending
institutions to report where they make loans, and provides a vital tool for community
organizations to investigate whether lending institutions are "redlining" neighborhoods, or
systematically refusing loans based solely on addresses within certain, often minority,
communities. The Community Reinvestment Act of 1977 requires banks to make loans and
provide services in the same area where they draw their deposits, and provides for community
input when financial institutions merge or make certain other changes in their services.

Many Americans assume that there are limits to the amount of interest that financial
institutions can charge. However, these were eliminated during the bank deregulation of the
1980s. Interest rates on mortgage loans, credit card balances and payday loans can be as high
as the market will bear. What may seem unethical is not necessarily illegal in the current
regulatory environment.

Despite the booming economy of the last decade, subprime lending in Chicagoland increased
by 1,524 percent between 1991 and 1997, from 3,137 loans to 50,953 loans. Simultaneously,
foreclosure rates on these loans skyrocketed, from 30 in 1993 to 1,417 in 1998, or 36 percent
of all area foreclosures in that year, up from only 1.4 percent. "Subprime" is the name given
to the loan market for borrowers with blemished credit. Some subprime lending gives access
to credit, at a higher price, for people who have not had perfect credit records and could not
otherwise qualify. "Predatory" lending occurs when these loans include excessive fees,
unjustifiably high interest rates, high-pressure sales tactics and deceptive practices. The
majority of the predatory market involves people who have equity built up in a home they
own, and are persuaded to cash it out at a very high interest rate when they hit a period of
financial difficulties. This puts them at high risk for losing their homes. (From "Preying on
Neighborhoods: Subprime Mortgage Lenders and Chicagoland Foreclosures" by the National
Training and Information Center.)